Can I Avoid a Lawsuit By Filing For Bankruptcy?
Recovering from debt can be a confusing time. Even after choosing bankruptcy as a fresh start, creditors may still come looking for their payments. So what happens if a creditor sues you in order to collect? One benefit of bankruptcy is that once filed, all collection activity is put on pause. This action is called an automatic stay and includes regularly scheduled monthly payments as well as collections lawsuits. Filing bankruptcy will typically stop lawsuits involving the following:
- Credit Card Debt
- Money sought for breach of contract
- Financial disputes between business partners
- Compensation for personal injury cases (i.e. car accident)
- Collection of a deficiency balance (the amount still owed after a property auction)
Putting a hold on these lawsuits does not necessarily make them go away. They will simple be absorbed into the bankruptcy and handled by the bankruptcy court.
At LJ Law we still encourage our clients to answer any court summons they receive, simply to protect themselves in the event the bankruptcy does not occur for whatever reason. By not responding to a summons, by default the creditor will be granted whatever terms they asked for in the lawsuit, even if a payment plan is already in place.
To discuss your specific situation in more detail, contact our office to speak with an experienced bankruptcy law attorney. We can be reached at (702) 998-1188, email@example.com or schedule a consultation online.